Groundhog Day

Bonds, tech stocks, credit, housing, commodities... a would-be bubble in everything.
Marc Faber, by way of Michael Panzner illustrates just how removed from any
kind of sound economic foundation we became (Will
They Ever Grasp the Simple Truths?) by the time the rolling bubbles of
the 2003-2007 time frame had hit full throttle around mid-decade.

You've seen the movie Groundhog Day, with events repeating over and over
in a maddeningly similar pattern? Our policy makers have been schooled in a
system that has proved itself to be unsound or worse, disastrous and yet in
their densely myopic fashion, these bureaucratic stooges move forward pumping
the same old policy as heroin into the [debt] junkie as the first and most
privileged abusers, the big banks, laugh all the way to the... bank. That would
be our children's piggy banks. We have eaten their future, and it is criminal.

Making matters worse, this is cultural. It is not the fault of Republicans
or Democrats. To be sure, their respective policies have corroded the moral
underpinnings of a great country that in turn has led much of the rest of the
connected world right into the abyss of moral hazard. I read a statement somewhere
recently to the effect that as long as the average American has a color TV,
they won't make any trouble. The average American has been bred - like cattle
- to remain docile and accepting of fate. It took Republicans, Democrats and
the average American to get this done; to get us to a stage of moral hazard
whereby the only perceived solution is to administer more of the poison that
keeps killing us. Well, it takes those three groups in concert with the guidance
of the troubadours on Wall Street and financial television.

The preceding paragraphs sound a lot like the articles I used to write in
2004-2007 before Biiwii.com went commercial with its newsletter. NFTRH must
tone down its indigence over the inequity and ultimate tragedy of what the
macro crooks are doing and remain focused on its theme of getting the intermediate
swings right; of surviving and thriving in the wake of wrong headed and immoral
policy. The most macro theme is of course that deflation is merely a lever.
It is a lever that gets pulled again and again (until the handle breaks off)
in service to inflationary policy. The key is in understanding that money is
created out of thin air by various methods of mad genius, comes from no productive
origins, and flows toward things of real value. But there are a lot of traps
along this progression.

Currently, we are dealing with the aftermath of the mother of all deflation
scares and are riding hope in what I believe is the 'false dawn', with certain
leading indicators improving and policy makers looking more and more in control.

I clearly remember when, in 2003, I had to swallow my gall and admit that
the cyclical bear was over. That is where the 'is what it is' theme for the
website came from. It couldn't be a bull market, could it? But look at the
economy, look at the war on terrorism and its sub-themees of smallpox, nuclear
instability, invasion, etc.

No! Look at the little bespectacled man behind the curtain, pulling policy
levers like crazy, look at the cozy macro-vendor financing relationship the
US and China have cooked up and most importantly, look at the charts! It is
a source of satisfaction for me that despite my views that the bull from 2003
was the result of cooked macro books, I was able to outperform the broad market
bulls year in, year out, by more than 100% during the cyclical bull market.

Well, there were signals in the charts and they first said 'stop being bearish'
and then eventually said, 'yes Gary, the policy is perverted and immoral...
keep your financial ethics and beliefs but get the hell out of way, and get
LONG or at least trade long'.

Today the S&P 500 is thus far just obediently following our game plan,
with a minor hitch along the way that seemingly negated NFTRH's most bullish
potential outcome as it failed to decline toward 800 recently in what would
have been a potentially solid right side shoulder to a major inverted head & shoulders
formation. That thing we have now is not well formed, and it does not pack
the power (of negative sentiment) that the pain of an interim, fear stoked
decline to 800 would have.

No, this market has places to go and people to see. It is bolstered by more
and more analysts turning less cautious to all out bullish. The public should
soon follow with the upward thrusting price restoring their confidence. Now
again, the dream machine may once again kick in as we suspend financial reality
one more time, and if the signals are given, I will have to adjust. NFTRH made
its explosive gains in the gold mining stocks off of the historic opportunity
presented in October and November of last year. They say you really only need
one great trade a year. For me, that was it. Now I trade in patience, and let
events play out.

Everybody is taking note of the mighty S&P rally and there is a lot of
micromanaging going on about it. All I can tell you is that NFTRH's minimum
upside target has not yet been reached, and I am currently a bear due to the
untenable risk/reward ratio this market presents. Get that? A bear whose upside
targets have not been reached. A bear who was more bullish than many of the
newly brave months ago.

So yes, there could be a bull signal up ahead and a corresponding adjustment
in my market view. But as was shown in NFTRH43 this week, there is a big picture
signal for the S&P that must be triggered for me to even think of abandoning
the stance that holds that this is nothing but a suck-in of the (not so) innocents.
The signal would be very similar to what happened in 2003 when it was time
to deal in market reality. Right now, those declaring 'new bull market' now
that it appears safe to do so are kidding themselves.

In short, Hope '09 is doing its job. If however this becomes a legitimate
illegitimate (think about it) bull market, it will feel like Groundhog Day
in a different way, hearkening back to the early months of 2003.

Disclaimer:http://www.nftrh.com does
not recommend that any trading or investment positions be taken based on views
expressed on this site. If you speculate or invest it is suggested that you
consult a financial advisor qualified in your area of interest.